wah, even less than what the agent told devilplate. only 30 units?
Asia Pacific Singapore
Real Estate Development (GICS) Real Estate/Property (Citi)
Company
24 May 2010 7 pages
Allgreen Properties (AGRN.SI)
Downgrade to Sell: Risk of Further Disappointment
Downgrade to Sell/Low Risk from Buy, TP lowered to $0.93 from S$1.38 — We
are cutting our FY10E earnings by 21% following disappointing sales at Cascadia
and assuming delays in new launches. Facing more downside risk, the stock is
likely to trade at an RNAV discount of 50% (previous 25%), on our analysis.
Lackluster performance in residential properties — A showflat visit revealed that
sales at The Cascadia, along Bukit Timah Road, have been disappointing, with
approximately 30 units sold (out of around 140 units launched) during the first
weekend of its launch. Concurrently, MGPA, the previous buyer of 162 units
Cascadia’s initial phase, has sold its stake to Alpha Investment Partners at an
estimated 10-12% loss.
Launches likely to be delayed — Allgreen will pace the release of other projects
like RV Residences, Riverbay and Riviera 38 in line market demand. Citing
increasing demand from buyers, future projects are expected to be launched with
a higher proportion of smaller (450 sq ft) units. Given Allgreen’s current sales
figures, we assume delays in project launches.
Stable performance from investment properties — Performance from its
investment properties with retail and office rents averages S$7.50 and S$6.80 psf
respectively. Serviced apartments and hotels have also been seeing higher
occupancy rates, with the former above 90% and hotels around 85%. Current
average rents for serviced apartments stand at S$8,500/month and hotel room
rates at S$190/night.
Increased exposure to China ahead with launch of new projects — Management is
expecting the launch of mixed-use projects in Chengdu (25% stake) in June 2010.
In the pipeline are projects in Tangshan, Shenyang, Tianjin and Qinhuangdao,
with Allgreen having equity interests ranging from 10% to 31%.